Site C Report

Not on schedule, not on budget, and probably not needed

Delores Broten

November 23, 2017

Peace River Valley Site C flooding area | Photo: Wikipedia

After years of delay, the BC Utilities Commission (BCUC) finally got a crack at the assessment of the troubled Site C dam. The Commission was tasked by the NDP/Green provincial government with a limited financial review of three scenarios: continuing, terminating, or suspending the project until 2024. Their November 1 report is a model of clarity.

In making its determinations, BCUC used BC Hydro’s low demand forecast, and suggested even that might be “optimistic”: “the Panel is of the view that there are risks that could result in demand being less than the low case,” especially in light of the lack of LNG projects.

The BCUC commented somewhat wryly that “BC Hydro’s financing cost assumption that the cost of debt will not change over 70 years may not be supportable.”

The BCUC commented that “disruptive technologies” put great uncertainty into future forecasts, and also noted that alternative power storage, such as batteries, is reaching commercial development, and would diminish the need to use Site C’s power for flexibility. Further, the BCUC commented somewhat wryly that “BC Hydro’s financing cost assumption that the cost of debt will not change over 70 years may not be supportable.”

The uncertainly of project management, not to mention the geological difficulties of building at the site, create a good deal of risk: “The major risk of Site C in the short term is whether there will be further construction cost overruns. Site C is a major construction project and therefore inherently at risk of larger cost overruns than a smaller project. It has already exceeded its budget, only two years into a nine-year schedule. There are tension cracks and disputes with its contractors both of which remain unresolved. Although the project is currently expected to be completed by the publicly announced date of 2024, it is one year behind the schedule to which it was actually being managed. At this time, ratepayers are at risk for the known over budget amount, as well as further overages.”

Source: British Columbia Utilities Commission, Inquiry Respecting Site C, Executive Summary of the Final Report to the Government of British Columbia, November 1, 2017 (Click for full-size image)

BCUC said that relying on alternative power also had risks and uncertainties, for example, there may be no geothermal potential in BC. However, those risks could be mitigated by changing government policies, such as repatriating the Columbia River Treaty entitlement, remobilizing Burrard Thermal and reducing the use of Island Cogen for export “to provide capacity for the limited number of 16-hour winter peaks,” and/or increasing reliance on the market to supply those winter peaks.

Most tellingly, the BCUC analysis of load forecasts and costs concluded “it is possible to design an alternative portfolio of commercially feasible generating projects and demand-side management initiatives that could provide similar benefits to ratepayers as Site C.”

Conclusions

“We have not been asked to make recommendations or to identify which option has the highest cost to ratepayers or more significant implications than others. Nevertheless, we have provided our view that not only is the suspension scenario the greatest cost to ratepayers of the three scenarios, it also has other negative implications.

“We take no position on which of the termination or completion scenarios has the greatest cost to ratepayers. The Illustrative Alternative Portfolio we have analyzed, in the low-load forecast case, has a similar cost to ratepayers as Site C. If Site C finishes further over budget, it will tend to be more costly than the Illustrative Alternative Portfolio is for ratepayers. If a higher load forecast materializes, the cost to ratepayers for Site C will be less than the Illustrative Alternative Portfolio.

“We have provided a discussion of the risk implications of each alternative in order to assist in the evaluation.”